BT Group plc (NYSE: BT; London: BTA) added to its telco TV options today by announcing a partnership with Microsoft Corp. (Nasdaq: MSFT) that will see its BT Vision services delivered via the Xbox games console, and a new set-top box deal with Motorola Inc. (NYSE: MOT). (See BT Delivers TV Via Xbox and BT Picks Moto Set-Top Boxes.)

Microsoft has been talking about adding IPTV capabilities to the Xbox for about a year, and today announced that BT, which uses the software giant's MediaRoom IPTV platform for the delivery of its video-over-broadband services, will be the first operator to offer its TV and video services via the home device. (See Should the Xbox Be Your Set-Top?, IPTV Xbox Comes to London, and BT Focuses Its IPTV 'Vision'.)

The British carrier says its BT Vision customers, of which there were more than 100,000 at the end of September 2007, will be able to access its broadband-delivered video services via the Xbox 360 console later this year, and that the service will be available to existing as well as new Xbox users.

However, the Xbox 360 will not act as a set-top box. And that's important, because only the BT Vision set-top box will be able to provide the free, over-the-air digital TV and radio channels that are fed into the set-top via a roof-top aerial -- BT's broadband service does not include streamed broadcast TV channels.

That means BT Vision customers will need to retain a set-top box if they want to watch TV channels such as BBC1, BBC2, ITV1, Channel 4, and E4, which still dominate the U.K. TV market, as well as the Setanta Sports channel that provides live soccer coverage.

In addition, the Xbox does not have the recording capabilities of the set-top box, which can store up to 80 hours of TV programs on its internal hard drive.

Where the Xbox 360 console matches the set-top box is in accessing the BT Vision on-demand video and catch-up TV services, which is done by connecting to BT's home gateway, the Home Hub.

Xbox 360 users, of which there are about 1.5 million in the U.K., will be able to access BT Vision services with a firmware update that can be delivered via the broadband connection -– no new console or additional hardware is needed.

The advantages, says BT, are that users will be able to access multiple services from a single device –- online gaming as well as high definition on-demand video -- and be able to use the Xbox LIVE messaging services while watching TV.

BT points out that Xbox 360 users will also be able to hook up their consoles to their set-top box as well as the Home Hub, and feed the real-time TV and radio channels (and play their recorded TV programs) through the Xbox device. That, though, adds to an already complex setup that, if a customer wants to experience the full range of BT Vision-enabled services, will involve three different devices -– the Home Hub gateway, the set-top box, and the Xbox 360 console.

Despite the complication, the move is still positive for all involved, though, says Heavy Reading analyst Adi Kishore. "For Microsoft, this underlines its ability to support multiple platforms and provide a 'whole home' solution. If a carrier goes with MediaRoom as its IPTV delivery platform, it gives them that bit extra," that other IPTV service providers can't offer.

It's also good for BT and the carrier's customers. "This enables BT to target the whole Xbox 360 user community with its services, and for the consumer it means more choice, and that's always good," says the analyst.

Kishore, though, feels that BT might struggle to communicate how the Xbox fits into the BT Vision offering and explain clearly which services it does, and does not, enable.

The BT Vision Xbox 360 service will be available by the middle of 2008.

Moto gets the BT call
BT also today announced that Motorola is to become its leading supplier of BT Vision set-top boxes, starting in 2009. Moto will provide a version of its V-Box tailored for BT's TV services, which include over-the-air digital TV and radio channels accessed via a rooftop aerial as well as the on-demand video and catch-up TV services accessed via broadband.

The deal is good news for Motorola, says Heavy Reading's Kishore, as the vendor has struggled to replicate its success in the U.S. set-top box market on the international stage, and BT provides it with a significant European telco reference account.

It's not such good news, though, for Royal Philips Electronics N.V. (NYSE: PHG; Amsterdam: PHI) , the existing supplier of BT's set-tops. The carrier says the Philips product will continue to be supplied to new BT Vision customers during 2008, after which Motorola will become the lead supplier. (See BT Picks Philips Set Top Boxes.)

The news is also negative for Pace Micro Technology , which announced in December it is to acquire the Philips set-top box business. (See Pace Shoots for STB Stardom.)

— Ray Le Maistre, International News Editor, Light Reading